US benchmark West Texas Intermediate for September deliver rose 32 cents to $97.97 while Brent crude for September gained 23 cents to $105.25 in mid-morning trade.

Iraq's Kurdish peshmerga on Sunday reclaimed two towns from Islamic State fighters, buoyed by three days of US air strikes to stem the jihadist advance.

United States president Barack Obama on Thursday ordered his country's warplanes back into Iraqi skies to prevent genocide by the jihadists against besieged religious minority groups and prevent an advance on the Kurdish capital Arbil where US personnel are stationed.

"Investors take comfort in the knowledge that insurgents will be contained in northern Iraq, away from the oil fields in Kurdistan," said Desmond Chua, market analyst at CMC Markets in Singapore.

The so-called Islamic State group control large swathes of Iraq's north and west, and have declared a "caliphate" in those areas.

The sweeping offensive began on June 9, preventing Baghdad from exporting oil via a pipeline to Turkey and by road to Jordan.

Iraq's oil ministry on July 24 said crude exports totalled 2.42 million barrels per day in June, falling far short of a budgeted projection of 3.4 million bpd.

As the number-two producer in the OPEC cartel, Iraq's 11 percent of proven world reserves plays a key role on world markets and prices after violence disrupted oil exports from Syria and Libya.

The dip in exports adds to the woes of Iraq, which is heavily dependent on oil revenues while spending more on military equipment to battle the Islamic State group.